This was a budget aiming to restore some first principles to tax, work and benefits. I think, on balance, it delivered.
Among the bones and ruins of ‘New Labour’, among the scattered masonry of Labour’s boom and spectacular bust are some dragons. Dragons that are in urgent need of slaying. But did chancellor George slay them? Has he managed to become our new St. George, patriotically slashing at the twin dragons of high welfare & sub-par pay?
First major policy that grabbed my attention was the ongoing commitment on raising the income tax threshold. The forward progress toward raising it to a fully fledged £12,500 has been maintained. As the financial times reveals here: the raising of the threshold by which you start to pay it has risen again. What this aims to do is to ensure working people can expect to keep far more of their earnings; before the government comes calling for a slice of their income. It helps make work pay, and it also restores a vital first principle. That taxpayers should be able to expect a reasonable minimum income which is entirely their own. £12,500 is yours. No government can or should slice via income tax percentages off of that. Expect it, earned, yours. It’s a wonderful world away from the Labour years under Blair & Brown when people where informed they only had a right to £6,350 before government bruised in demanding its protection money.
Second policy was the radical cut-back to in work benefits. Specifically working tax credits. By radically reducing their scope, and generosity, George has taken the first major step toward ending the absurdity of taxpayer subsidy to low pay by private sector employers. He has stood up and vowed to end this racket (one which bares all the hallmarks of the corporatist state). These changes here are important when read with the raising of the minimum wage (more on that later). By taking the sword to the network of in-work benefits and tax credits, our new St. George has defeated another dragon. This one had the irritating habit of taxing low paid earners, only the give their money back to them; but only after being cycled through expensive civil service bureaucracy. Much more simple to let them keep more of their initial earnings, give them a pay rise, and not therefore need to recycle tax money back to them. We can do without the taxpayer subsidy to low pay in the economy. We can do without the dragon of low pay & his brother high welfare. No need for the expensive civil service monolith to oil the machine.
Third, as briefly already touched on: raising the minimum wage (or should this be called ‘living wage’?) Labour pledged £8 an hour. George has committed to £9 an hour by 2020, taking Labour best and besting it. Nobody saw this coming. This will help make work pay, it will specifically help the lowest paid most. The people working 35-45 hours a week in Tesco, or Aldi can now expect a significant increase in their incomes. Restoring the link between hard work & better pay and prosperity. When taken with the second point, it clamps down on the corporatist approaches.
Finally, inheritance tax reform. There is surely no bigger attacker of the principle of rewarding hard work. The death tax (as it should be more accurately termed) is simply a mechanism to let government riffle through your pockets after you’re dead. Only those leaving inheritances of over £1m will continue to pay the death tax. For the vast majority of British citizens they can now safely leave a legacy after a lifetime of hard work to their kids. Safe in the knowledge that the government machine won’t come sniffing out the sum result of their lifetimes of hard work, and loyal tax payment.
When taken all together, these reforms definitely go a long way toward slaying the dragons of high welfare, and low pay. It ensures work pays, taxpayers get to keep more of their own earnings. It ends the mentality of entitlement the government machine has hitherto had, to ever greater cuts of your take-home pay. No more corporatist subsidy of private sector pay off the backs of the poor bleeding taxpayers.
Today George Osborne has become, in his little way, our new St George.